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Berkshire Hathaway Inc. Message Board

kmcmahon38 10 posts  |  Last Activity: Jul 12, 2016 4:04 PM Member since: Nov 23, 2008
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  • Reply to

    Phil Town Speaks on Horsehead Court Proceedings

    by kmcmahon38 Jul 12, 2016 3:54 PM
    kmcmahon38 kmcmahon38 Jul 12, 2016 4:04 PM Flag

    Rest of article:

  • "One of the defining principles of American government is that it is the most important role of government to provide justice for the rich and poor alike. For that reason, the American image of justice is a woman in a flowing robe, blinded, holding a scale and a double-edged sword.

    The image comes down to us from ancient Greece and each aspect of the image is meaningful; the blindfold represents that justice is impartial without fear or favor regardless of money, fame, power, race, or identity. The scale symbolizes an objective weighing of the information presented. The two-edged sword represents the power of justice to be wielded against either side.

    There are many countries around the world that do not hold to this standard, nor even want to and, shamefully, even in the United States, Lady Justice is often peeking at the participants and arriving at a pre-conceived conclusion.

    The Problem With Bankruptcy Court

    It has been argued that bankruptcy court has evolved into something other than a court aimed at justice for equity holders, into a venue where rich and powerful creditors can strip ownership from small investors simply by showing up in court. The foregone conclusion by the court at the onset of a Chapter 11 bankruptcy is that the equity is worthless. Therefore, the court immediately takes measures against the equity holders to, in essence, deprive them of their ability to defend themselves against, often enough, powerful creditors who are supported by obsequious management.

    Typically, this takes the form of the US Trustee routinely denying the shareholders of the business, the rightful owners, of an Equity Committee through which the shareholders can:

    Hire lawyers to depose management
    Question the plans of management and creditors
    Challenge the valuation schemes of creditors
    Defend their interest in court
    …all of which will be paid for by the company just as it is for the other parties to this litigation."


  • kmcmahon38 kmcmahon38 Jul 12, 2016 2:26 PM Flag

    Why do you post this? We've acknowledged that there is a possibility shareholders lose, but the facts of the case clearly show that shareholders have a reasonable chance of a great outcome.

  • Reply to

    Too Late to Jump In?

    by patient_long Jul 9, 2016 2:14 PM
    kmcmahon38 kmcmahon38 Jul 11, 2016 12:55 AM Flag

    I'd also recommend reading the article on Seeking Alpha called "Horsehead Holdings - Something doesn't smell right" - It's a few months old and therefore outdated, but it makes compelling arguments supporting the claims that I and others have been making.

  • Reply to

    Too Late to Jump In?

    by patient_long Jul 9, 2016 2:14 PM
    kmcmahon38 kmcmahon38 Jul 10, 2016 4:57 PM Flag

    Obviously with investing, there are zero certainties.....but here is the way I am looking at things:

    Without Guy Spier and Phil Town, there would be no equity committee and Greywolf would've walked away with the entire company for pennies on the dollar. Spier and Town have been effective at persuading the court.

    Both Spier and Town own the same shares that we own (ZINCQ, formerly ZINC), so they are completely aligned with us. The only way they financially benefit from this situation is if something good happens to these shares (including being offered warrants on new company in exchange for these shares, which is an unlikely but possible scenario).

    Both Spier and Town have spent considerable money on lawyers, appraisal companies, conferences etc in making the case to the court that they had buyers looking to pay much more for assets than Greywolf told the court they were worth. I don't think they would waste their time doing this if they weren't highly confident it was in their financial best interests to do so. Keep in mind their cost basis is far higher than the $.56 per share, so they are not looking for $.80-$.90 per share. They are looking for a big payout.

  • Court hearing just concluded after a pretty long wait while both parties negotiated.

    The equity committee convinced the debtors that they have to be open to any potential inquiries on the company that would generate more value for all holders during the exclusivity period. If the equity committee believes they aren't honoring that, they have the right to expedite a court hearing to end the Debtors exclusivity period.

    In other words, the Equity Committee made a petition to the court stating that:

    a) the Equity Committee had an independent appraisal done that found the fair market value of ZINCQ assets to be far in excess of what debtor in possession (Greywolf) claimed. ($4.00-$6.50 per share, vs. $.50 current).
    b) the Equity Committee had received serious inquiries from outside parties interested in Horsehead assets.
    c) that these outside parties have placed tentative valuations on the assets far in excess of what Greywolf claimed they were worth

    The court today has ruled that Greywolf must allow bidding on these assets, and if the bidding results in an outcome that would be most favorable for all parties (including ZINCQ shareholders), then they must proceed with sales to those interest parties.

    In other words, today was a victory for shareholders. The important next step is the contingent successful sale of assets in line with prices set forth by the independent appraiser. If that happens, ZINCQ holders could be looking at potentially $4+ per share. Good luck.

  • kmcmahon38 kmcmahon38 Jul 6, 2016 4:20 PM Flag

    Peter - there is a lot of digging required to get to the answers. In a 30 second summary, Horsehead made several acquisitions that lead to a cash burn, but the real problem was that management was grossly incompetent and never able to get their Moorseboro production facility up and running in a timely fashion. There were design flaws, machinery issues, you name it. As a result, the Moorseboro facility operated at about 30% of what it should have been, all while Zinc prices were sitting at 20 year lows. Not a good combination for the bottom line.

    Management consistently made promises that the facility was just about to get up and running at full speed, and then all of a sudden they were forced into BK by these Greywolf savages over a technical default of something like $2M dollars. However, the asset base including production facilities are very real and are worth a great deal more than what the Greywolf savages have tried to trick the bankruptcy court into believing. W

    Hope that answers your questions.

  • There is a court date schedule for tomorrow, but the filings are available now. Independent appraisal group states the company should be worth in excess of $4 per share after all liabilities paid, and states that they have "several" parties who are interested in Horsehead assets and are requesting that the court allow the bidding process to start for those assets.

    If you haven't read the court documents, I highly suggest you take a look at them.

  • They make a very compelling case for this valuation after subtracting all debts. It is also appears that the court is now recognizing that management and Greywolf colluded to force this technical default. There is a meeting on July 7th that should prove to be very interesting.

  • that is the rumor going around.

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